Dubai World in Debt Freeze

The Dubai government revealed today that it is to ask creditors of Dubai World, which has debts in the order of $59bn, to agree a debt freeze as it restructures the state-owned holding company. The news sparked fears that Dubai is in danger of default, and led to sharp falls in stocks exchanges across both Europe and Asia. Markets in the US were closed for the Thanksgiving Holiday.

Dubai World’s shock call for a debt moratorium will not see restructuring at its subsidiary, DP World multinational port division. However, the impact on the P&O Ferries business was not immediately clear. A source at P&O Ferries said that the news had broken without warning, and that employees only know what they have read in the media about the development. However, he pointed out that the operation is autonomous and self-financing, so there is no automatic reason to fear that it will be directly hit.

Dubai World is best known in the UK for its £3.9bn ($6.4bn) acquisition of P&O in March 2006. Assets changing hands included what were then the world’s fourth-largest port operator and the market leading cross-Channel ferry concern. P&O Ferries is owned directly by Dubai World and is not part of DP World.

Dubai World is one of the emirate’s three big holding firms, along with Dubai Holding and Investment Corp of Dubai. In addition to DP World affiliates include Nakheel, its property unit, and Istithmar, an investment company with a portfolio of over 50 firms in the financial services, consumer, industrial and property sectors. There is speculation that some of these interests could now be broken up.

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